Can analytics and the IoT prevent an energy sector death spiral?

One of the NZ Downstream 2017 leaders' panel discussions, Realising the Opportunity of Change, ventured into grim territory - the death spiral of the industry.

The energy sector in New Zealand and around the world has seen a wealth of innovative technologies in recent years. But are these advancements a double-edged sword? They will be, unless organisations develop strategies to effectively leverage them. How can the internet of things (IoT) and analytics save the industry?

Why is the energy sector in trouble?

Facilitator John Hancock, director of Signature Consulting, explained that this death spiral is the result of previously expensive and unreliable technology becoming more affordable and stable. Solar panels are an excellent example of this, with the first high-profile use in the Apollo missions of the 60s and 70s. Back then, each panel cost around $15 million. Now, they're affordable enough to pose an alternative to the grid for many consumers. That presents a problem of stranded assets for the energy sector.

"This is what's called the death spiral of the industry"

John Hancock
Director, Signature Consulting

"If you disconnect from the grid, and you're running a fixed-cost business, then what happens to the allocation of costs to everyone else on the grid? It goes up," John said.

"So if the costs that you're being exposed to go up - and you're looking at disconnection alternatives - then what do you do? You're probably more interested in disconnecting, so a couple more people disconnect. Then, what happens to the allocation of the fixed costs to those who are left? They go up again, and again and again until the very last person connected to the grid has to pay for everything."

Battery storage systems make it much easier for consumers to become independent of the grid.

Will battery storage systems upset the status quo?

While solar photovoltaic (PV) panels were first becoming more widespread, certain limitations helped ensure those houses still connected to the grid. Even now, they cannot generate enough electricity to supply all of a household's power needs - weather and limited daylight hours are rather uncompromising in this regard.

This need for stability, combined with the ability to sell surplus power back into the grid, kept most solar PV owners connected to distributors. They generated power to use during the day, sold back the excess and then paid for electricity at night.

What has changed, however, is the availability of battery storage systems. Now, rooftop solar PV panels can send excess power into battery systems, rather than back into the grid. There are questions of system reliability, but this may provide a sufficient amount of backup power to enable independence from the grid.

"These technologies are exciting - when coupled with the internet of things - and are giving consumers greater choice and control in meeting their power needs. Meeting the expectations of empowered consumers will challenge the operation of the energy system as we know it," she said.

"To be resilient, ensure continuous security of supply, affordable energy, and to meet the environmental and consumer demands of the market, the energy sector must do more than just respond to change - it must drive the change."

Keeping customers connected

"We need to look at how we can be smart about reinvestment in our networks."

The ease of going off-grid isn't promising for organisations in the industry, especially with the potential for a death spiral always on the horizon. To mitigate that risk, businesses need to drive change by developing strategies for discouraging disconnection, especially for those consumers who make the switch to a solar PV and battery setup.

Fortunately, some industry leaders are anticipating this need.

"These technologies are not going to go away, they're going to continue to develop. We need to look at how we can be smart about reinvestment in our networks to provide that security and reliability of supply the minister talked about," said Ken Sutherland, chief executive of Unison.

The IoT and analytics

Along with analytics, the IoT will play a key role in the energy sector - particularly in improving grid stability and incentivising customers to stay connected.

"We must be able to ensure we have quality on those networks whilst we have more devices that are connecting to them," Ken said.

"From that point of view, we've got to get more analytics on our network in terms of monitoring performance - trying to get more out of the network as opposed to reinvesting in larger capacity."

We saw a demo of this at Downstream - not in the presentations, but at the Panasonic booth. The company has introduced a lithium-ion home battery system that uses a cloud-based analytics platform to inform decisions about charging and discharging the battery. Connected to the IoT, it can help move power between linked homes and energy providers based on need.

This granular level of control can be used in conjunction with sophisticated rate models to ensure connected customers are getting the most value out of their electricity, whether generated with solar PV or supplied through the grid.

How Panasonic's battery and control system work is indicative of the larger evolutionary track of analytics within the energy sector - a progression from monitoring to greater control and, eventually, automation. Through a range of tools such as grid optimisation and predictive modelling, analytics underpins the use of smart devices to bolster safety and reliability across the network.

SAS Analytics can help provide the insights needed to drive this level of service through the IoT. Contact us today to learn more.